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Mandatory Bundled Payments Cut Spending $800 Per Joint

Analysis  |  By Christopher Cheney  
   January 31, 2019

A decrease in utilization of postacute care facilities accounted for most of the reduced spending on hip and knee replacement procedures in the CJR program.

In the first two years of Medicare's mandatory bundled payments for hip and knee replacements, spending per episode decreased slightly without increased complications, recent research shows.

Bundled payments are one of the most widespread forms of value-based reimbursement in the country, with both government and commercial programs.

The researchers focused on Medicare's Comprehensive Care for Joint Replacement (CJR) program. The mandatory hip and knee episodes of care were launched in 2016. Last year, there were about 465 hospitals in the program.

"The CJR program helps address the question of whether savings seen in previous evaluations of bundled-payment programs were attributable to the select nature of the hospitals that volunteered. Our findings suggest that the changes observed in voluntary programs may be echoed in mandatory programs," the researchers wrote.

Based on Medicare claims data from 2015 through 2017, spending on joint replacement episodes under mandatory bundles decreased more than a control group of hospitals—falling $812. The researchers found that the reduced spending was linked to a 5.9% decrease in utilization of postacute care facilities.

Hospitals benefit from engaging postacute care partners, the lead author of the research told HealthLeaders recently.

"Strategies that hospitals appear to be taking include forging closer connections with skilled nursing facilities to understand the rehabilitation needs of their populations, and having a more disciplined, systematic approach to discharge planning and rehabilitation assessment," said Michael Barnett, MD, MS, an assistant professor of health policy and management at Harvard T.H. Chan School of Public Health.

Management of postacute care paid off financially for top performers in CJR, he said.

"By far the biggest source of reductions in spending came from lower use of SNFs and inpatient rehabilitation facilities. This was counterbalanced by an increase in the use of home health services, which are naturally much less expensive. Hospitals that saved money focused on how they could send patients home who may not have needed the intensity of rehabilitation," Barnett said.

Mandatory bundled payments programs appear to generate significant spending reductions, he said. "As long as patients continue to receive the highest quality care, saving money is a big advantage of mandatory bundles because we know that growth in Medicare spending continues to squeeze the entire federal budget."

More effective management of postacute care is another benefit of mandatory bundles, Barnett said.

"A large advantage is if patients begin receiving more deliberately coordinated and organized care to provide the right level of care to have excellent outcomes. If someone can spend time at home recovering from surgery instead of a nursing home, I think most patients would view that as a success."

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


Last year, Medicare drafted nearly 500 hospitals for mandatory participation in bundled payments for hip and knee replacement procedures.

Bundled payments work effectively when quality is not sacrificed for cost savings.

Cost-cutting in postacute care can generate significant episoide of care cost savings.

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